Want Free Money for School During Residency?
The Lifetime Learning Credit Could Be Perfect for You!
Are you a resident with a non-working spouse who wants to take some college courses to further his/her education while you’re working shifts?
Residency may be your last chance to receive free money from the government for education!
When it comes to free money for education, there are two main types of tax credits that the government provides:
The American Opportunity Tax Credit (AOTC)
The Lifetime Learning Credit (LLC)
What are the main differences between these two? Think of the AOTC as a tax credit for undergraduate education. A maximum of $2,500 in tax credits is available per year, but only during the first four years of undergraduate studies. If your non-working spouse has already completed a undergraduate degree, they likely won’t qualify for this credit. This is likely true for most resident households.
The LLC is the tax credit I want to focus on today.
It provides a maximum of $2,000 per year per household for education expenses beyond undergraduate studies. The goal of this credit is to encourage taxpayers to continue their education even after completing a formal college degree.
The Biggest Hurdle: Income Limits
The biggest challenge in qualifying for the LLC (and AOTC) is the income threshold. For physicians, once they start earning “the big boy/gal” attending salaries, they become ineligible due to income limits. Once your household income reaches $180,000 or more (for married couples filing jointly), the LLC is no longer available.
That’s why it’s important to take advantage of credits like this during residency or fellowship— before your earnings skyrocket as an attending.
Other Requirements
You must take classes from an accredited school that offers degrees. However, you don’t need to be enrolled in a degree program—even a single course can qualify. So, you could take a cooking class at a degree-granting vocational school. Of note, a course from a YouTuber likely won’t qualify (lol—I’ve bought courses from YouTubers like Meet Kevin, and they were actually very good!).
If you pay for the expenses at the end of the year, you must start taking courses within the first three months of the following year. This means you cannot prepay a year’s worth of classes in advance to qualify for the credit.
You must also receive Form 1098-T from the education institution to claim the credit.
How to Calculate the Credit Amount.
The Lifetime Learning Credit (LLC) your household can receive equals 20% of eligible education expenses, with a maximum credit of $2,000 per year.
That means:
To receive the full $2,000 credit, you must spend $10,000 on qualified expenses.
Qualified expenses include tuition and required academic fees.
Expenses such as room and board, books, and insurance are NOT qualified expenses.
Examples of How the Credit Works
If your spouse incurs $2,000 in education expenses → Your household gets a $400 tax credit (20% of $2,000).
If your spouse incurs $10,000 in education expenses → Your household gets the full $2,000 credit (20% of $10,000).
Any expenses beyond $10,000 do not increase the credit.
Final Thoughts
If your spouse is considering taking courses while you’re working shifts, residency may be the last opportunity to benefit from this educational credit (free money!) before your attending income disqualifies you. While $2,000 per year may not seem like much, it’s still free money from the government—so take advantage of it while you can!